Spotlight on Oracle's Fast-Growing Cloud Database Services
FY2024 Q4 recap: deals with OpenAI and Google Cloud—and 26% growth in cloud database services.
Welcome to the Cloud Database Report. I’m John Foley, a long-time tech journalist, including 18 years at InformationWeek, who then worked in strategic comms at Oracle, IBM, and MongoDB. I’m now a VP with Method Communications.
Oracle came up short of earnings estimates when it reported Q4 FY2024 results, but no one seemed to care. The company’s stock rocketed to an all-time high the next day on optimism around its fast-growing cloud business, high-profile deals with Google Cloud and OpenAI, and AI momentum.
There’s a lot to parse here, but let’s start big picture. In Q4, Oracle continued to demonstrate industry-leading innovation with its data platforms and cloud services—it released Oracle Database 23ai in early May—while at the same time establishing impressive partnerships with would-be competitors that bode well for its go-forward strategy.
Q4 in a nutshell:
Overall revenue grew 3% to $14.3 billion
IaaS + SaaS revenue climbed 20% to $5.3 billion
Cloud infrastructure revenue jumped 42% to $2.0 billion
Adjusted earnings of $1.63 per share were 2 cents shy of expected $1.65 in Q4. Revenue fell a bit short, too. For the fiscal year, Oracle reported $53 billion, up 6%.
Full results here.
Oracle CEO Safra Catz offered an upbeat outlook for FY2025, with double-digit overall revenue growth and each quarter expected to grow faster than the previous one.
And why not? The strategy Catz and Chairman/CTO Larry Ellison have been laying out for the past few years—modern data management with Oracle Cloud Infrastructure (OCI) and multicloud connectivity via state-of-the-art data centers—seems to be exactly what customers want as they forge ahead with digital transformation and AI projects.
Deals with OpenAI and Google Cloud
Oracle successfully and somewhat brilliantly turned potential negative attention away from the shortfall in “expectations” by making two major announcements along with its earnings statement—new deals with OpenAI and Google Cloud.
In the first, Oracle is teaming up with Microsoft to “extend” Microsoft’s Azure AI platform to Oracle OCI to give OpenAI more capacity. It’s the latest in a series of liaisons that Oracle has struck with big names in AI, including Nvidia and Cohere. In the process, Oracle is establishing itself as a serious player in AI infrastructure. On that point, Oracle reported $12.5 billion in AI contracts in Q4.
In the second announcement, Oracle reached agreement with rival Google Cloud to let their joint customers run Oracle Database services on Oracle OCI in Google Cloud data centers. The new service, called Oracle Database@Google Cloud, sounds a lot like Oracle Database@Azure, which Oracle and Microsoft jointly announced last September. Oracle Database@Google Cloud is slated for availability later this year. Meantime, customers can use Google’s Cross-Cloud Interconnect to deploy general purpose workloads without data transfer charges.
Cloud database services driving growth
Oracle’s flagship database business is under pressure from AWS, Google Cloud, and Microsoft, as those competitors continue to develop and invest in a wide range of their own database platforms and services.
But Oracle isn’t giving up hard-won ground easily. Catz noted that Oracle cloud database services grew a robust 26% in Q4 and referred to them as a “third leg of revenue growth,” along with OCI and SaaS.
Here are some telling quotes from the Q4 earnings call:
Safra Catz: “In Q4, Oracle signed the largest sales contracts in our history, led by huge demand for training large language models, as well as record levels of sales for OCI, Autonomous, Fusion, and NetSuite.”
Safra Catz: “Database subscriptions, which includes database license support, were up 6% and highlighted by cloud database services, which were up 26% and now have an annualized revenue of 2 billion. Very importantly, as on-premise databases migrate to the cloud, either to OCI directly or using Database at Azure or Database at Google Cloud, we expect these cloud database services will be that third leg of revenue growth, alongside OCI and strategic SaaS.”
Larry Ellison: "As this Azure/OCI cloud capacity becomes available to the large installed base of Microsoft and Oracle customers, it will turbocharge our cloud database growth. Now customers can run any and every version of the Oracle database—Autonomous, 23ai Vector DB, etc.— in both the Azure and the Oracle Clouds. As customers continue to choose and use multiple clouds, hyperscalers like Microsoft and Google are responding by interconnecting their clouds. Oracle recently signed an agreement with Google to interconnect our clouds—and initially build 12 OCI data centers inside the Google Cloud. We expect the Oracle database to be available within the Google Cloud in September this year."
It’s hard to overstate how significant Oracle’s multicloud database strategy is for organizations that want to run Oracle Database in their public cloud of choice. And, because Oracle, Microsoft, and Google Cloud, respectively, are doing much of the integration, these arrangements reduce some of the complexity that customers would otherwise have to deal with themselves.
But this leaves one big and obvious question, which one analyst asked on the earning call: Will Oracle establish a similar arrangement with AWS?
Ellison responded: “We would love to do the same thing with AWS,” he said. “We think we should be interconnected to everybody, and that's what we’re attempting to do in our multicloud strategy. I think that’s what customers want. So, I’m optimistic that’s the way the world will settle out.”
As the saying goes, don’t hold your breath for that one. But now that Larry & Co. have brokered partnerships with Microsoft and Google Cloud, an Oracle-AWS collaboration seems in the realm of possibility.
Thousands of new features
We shouldn’t be surprised that there continues to be so much interest in and activity around Oracle Database. While it’s true that Oracle Database was first introduced 45 years ago, Oracle continues to introduce hundreds and even thousands of new capabilities for its flagship database. The recently released Oracle Database 23ai supports vector search and AI development, as I discussed in a recent blog post.
In addition to the reporting and analysis I do here on Substack, I write a series of columns on the Oracle Connect website that look more closely at some of the latest technologies and trends around Oracle Database. The most recent of those explores Select AI, a new capability that lets users perform natural language queries and have “conversations” with Oracle Database.
Following are three of my recent Oracle Connect columns:
“Natural language queries to Oracle Autonomous Database? Yes—with Select AI”
“Oracle’s new JSON relational capability helps solve a big IT challenge”
“5 advantages of using an integrated vector database for AI development”
I share these now because such innovations help explain how and why Oracle Database services can continue to be a strategically important growth driver. In the fast-emerging world of AI, data and data management will be more critical than ever.
(Note: Oracle is a client of Method Communications, where I’m a VP and tech editor. This blog post was independently written and published.)